New brokerage house at throwaway price

Bangladesh Securities and Exchange Commission (BSEC) has decided to sell Trading Right Entitlement Certificate (TREC) at a throwaway price charging merely Taka 5 lakh for setting up a new brokerage house despite strong opposition from the Dhaka Stock Exchange (DSE).

According to BSEC sources, the Commission informed the Managing Director of DSE in this regard in a letter sent on September 27. In the meantime, the letter has been sent to the press for gazette publication.

As per decision of BSEC, the stock exchange will submit annual plan for TREC issue to the Commission within the first month of the financial year. Apart from the provisions of the Rules, the Commission will also issue directions from time to time on TREC issues.

DSE has been opposing the TREC registration fee of Taka 5 lakh from the very beginning. Even the Board of DSE dissented on the issue.   Although Rakibur Rahman was the only one of the four shareholder directors of DSE agreeing to this issue but Shakil Rizvi, Minhaj Mannan Emon and Mohammad Shahjahan opposed it. However, the previous commission had said that it would publish the final gazette considering the views of the DSE.

The biggest problem with the TREC issue was the fixation of fees in the Rules of the BSEC which remains the same at the end. The stock exchange served a legal notice on BSEC on behalf of the DSE Brokers Association of Bangladesh (DBA) regarding fixation of the fees.

It is learned that companies, statutory bodies or any organization approved by the Commission can buy the TREC of the stock exchange. In order to purchase TREC, they have to apply to the exchange with a fee of Taka 1 lakh and have to pay Taka 5 lakh as registration fee. DSE has been opposing these rules from the very beginning as the amount of this fee has been much less.

According to DSE, last time a DSE membership was sold for more than Taka 32 crore. Even the price of a brokerage house is Taka 15 crore as selling price of 25 percent of shares to strategic investors. TREC registration fees appears to be very much nominal in comparison.

A Director of DSE, subject to anonymity, told The Business Post that on July 8 the DSE Board decided to sell the TREC at Taka 5 crore in the light of the BSEC's draft. Besides, it was decided to increase the application fee to Taka 10 lakh which was reported to BSEC. However, the Commission did not give importance to this opinion of DSE.

Meanwhile, many people are not able to accept the fact that the decision to fix the fee is vested on the stock exchange by the law but the BSEC has fixed it. According to them, the fee has been fixed for giving TREC to a particular group thereby benefiting many personally.

Professor Abu Ahmed, a capital market expert, said the decision to fix the TREC registration fee should have been made in line with the current market price. DSE has objected as it was not done. The BSEC needs to take care of the issue so that the market does not become volatile again.

It is learned that the final rules require a paid-up capital of at least Taka 5 crore to take the TREC and a deposit an amount of Taka 3 crore in the stock exchange. However, in case of joint TREC with foreigners, the paid up capital is Taka 8 crore and in case of foreigners alone, Taka 10 crore has been mentioned. In case of deposit it is Taka 4 crore for purchasing jointly with foreigners and Taka 5 crore when purchased by foreigners only. The annual fee for the TREC has been fixed as Taka 1 lakh.

sr/wi